TI allowances increasing, up more than 20 percent since 2015

Office
construction has ramped up significantly in 2016 and 2017, reaching a cyclical
high of nearly 2 million square feet in Q2 of 2017, prompting
a surge in employment within the construction sector. And as we pointed out in
last week’s snapshot, this increased demand led to a 11.7 percent increase in
hard construction costs for prime office between 2015 and 2016.

Overall costs experienced by tenants
has increased markedly. As a result, Landlords have increased TI allowances
21.3 percent since 2015 in order to stay competitive.

Landlords
looking for a reprieve from high
construction costs can find comfort in the movement towards creative
office space. As JLL’s Tech Office Trends 2017 points out, fit out costs for
creative office are on average 15 percent less than traditional office build
outs.

Not
only is creative office cheaper to build out, second generation tenant
improvements for creative office space costs just one quarter of what Class A
traditional office costs. ​​